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Question: How would you explain the correlation between the amount of corruption in a country and economic development?
Many factors gets considered to measure whether an economy is developed or not, some such important factors foreign direct investment, life expectancy, gross domestic product, human capital availed, investment on technology and human capital etc., one of the main factor which can negative impact the growth of an economy is corruption which is usually treated as a crime and existence of corruption in a country can lead to other crimes such as bribery, under table transactions, money laundering, double dealing etc., and all these activities restricts economic growth (Svensson, 2007).
As discussed above foreign trade and investment plays a very important role in economic development, but foreign investors hesitate to invest in corrupted countries as they seek competitive and fair business world, where they can get good returns on their investment.
Existence of corruption can also negatively affect the quality of education and healthcare in the country as it can increase the cost of education due to which country may lack in knowledge and talented workforce.
Existence of shadow economy is one of the biggest problem as country may not be able to calculate the accurate net income and existence of corruption in country can promote existence of shadow economy where individuals and business organisations not get officially registered with the government to avoid taxation and these kind of business usually pay less compensation to their employees than fixed by the government (Jomo, 2000).
Existence of corruption in a nation also limits the innovation as people feel that their idea may get copied by those who possess more power and they try to import that technology from other countries and thus their GDP increases. Hence from the above discussion we can say that corruption impacts the overall growth of the economy.
Any dishonest behaviour by people, who are in powerful position like government officials, managers, industrialist etc., is called corruption. Usually corruptions can be of many types all those activities which are performed to have some personal gain like accepting bribes, involving in under table transaction, favours, nepotism, money laundering etc., are considered as correctional activities. As per the ethical point of view involving in corruption activities is considered as crime and it not only affects the society but the acts as a bottleneck which can restrict economic growth (Svensson, 2007).
The growth of economy is evaluated on the basis of many factors and elements and one of such factor is corruption, people usually consider a corrupt free country as developed one and vice versa,
The following points will explain who corruption can impact the economic growth.
· Total savings of the population of the country is one of the factor people consider to measure the growth of any nation, in case of highly corrupted countries power industrialist simply bribes the government officials and tries to modify the rules and regulations in their favour, they tries to be monopoly in the market so that they can fix high prices for products with low quality and can increase their profits, because of this customers and their savings gets effected.
· In corrupted countries the resources gets distributed unevenly and because of this the gap between rich and poor is increasing day by day. Not the deserved one but the one who have more financial power avails opportunities and enjoys luxury life bad due to this rich are getting richer and poor are becoming poorer (Jomo, 2000).
· In case of corrupted countries, shadow economy exists which means many business and individuals in order to have tax exemption not get registered with the government and due to this income generated by these people not officially gets calculated.
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